Historically, Massachusetts courts routinely ruled that it was a violation of the Massachusetts Wage Act to fail to pay an employee who had been promised payment for her work only after the employer received sufficient funding. For example, in Stanton v. Lighthouse Financial Services, Inc., U.S. District Court Judge Nancy Gertner found not only once, but twice, that John Stanton was an employee under the Wage Act, was entitled to payment of deferred compensation under his employment contract and confirmed that there was no carve out from the Wage Act’s requirements for startups. In reaching her decision, Judge Gertner reasoned that a deferred compensation agreement where the compensation was forfeited violated the Wage Act provision prohibiting the entering into of a special contract to avoid Wage Act obligations. Since Stanton, a number of Massachusetts state and federal court cases have ruled that compensation contingent upon a company’s receiving certain levels of funding were wages that were required to be paid in accordance with the Wage Act and required such wages to be paid promptly and upon termination of employment – even if funding had not then occurred.
In what could be viewed as a new twist, Superior … Keep reading
As I have previously warned in prior blog posts here and here, the Massachusetts Wage Act exposes a company and individuals having management responsibility for the company to mandatory treble damages and attorneys’ fees for failing to pay wages. Because the statute, however, does not define the term “wages,” employees have attempted to apply the Wage Act’s beneficial damages provision to any type of compensation. A true “bonus” need not be wages and the failure to pay a bonus would then not subject an employer or its management to the risk of treble damages or attorneys’ fees. Nevertheless, it is not always easy to determine if a particular payment is a bonus or wages.
A recent Massachusetts case, Boesel v. Swaptree, Inc., helped clarify the distinction between wages and a bonus. Specifically, Boesel discussed three provisions in an employment agreement that can be used to clarify how the payment to an employee should be characterized:
- Describe a bonus in a provision that is separate from the provision describing base salary. In Boesel, the plaintiff argued that the discretionary bonus in his employment agreement was earned ratably over the course of the year and was part of
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In a June 13, 2013 decision, the Massachusetts Supreme Judicial Court clarified that managers of Limited Liability Companies (LLCs) can be individually liable for violations of the Massachusetts Weekly Payment of Wages Act, and, thus, be personally responsible for treble damages and attorneys’ fees.
In Cook v. Patient Edu, LLC, the lower court had originally dismissed claims asserted against the two managers of the defendant LLC for failure to pay more than $68,000 in compensation owed to the plaintiff under an employment contract. In dismissing the claims, the lower court reasoned that because the Wage Act, by its plain language, only imposes liability upon the “president and treasurer of a corporation and any officer or agent having the management of the corporation or entity;” it does not impose liability on “managers of a limited liability company.” The SJC, taking the case from the Appeals Court on its own motion, reversed the lower court’s decision, ruling that “… a manager or other officer or agent of an LLC, limited liability partnership or other limited liability business entity may be a ‘person having employees in his service,’” and thus may be civilly or criminally liable for violations of the … Keep reading